Virginia gov announces compromise on electric rate overhaul

By ALAN SUDERMAN -

2/5/18 5:38 PM

RICHMOND, Va. — Virginia’s governor is endorsing a major overhaul of electricity regulations sought by utilities in the state, despite warnings from the state’s attorney general and others that customers will end up paying more than they should.

Gov. Ralph Northam issued a statement Monday saying he supports legislation imposing new limits on the ability of state regulators to lower rates of Dominion Energy and Appalachian Power even though they are earning excessive profits. Supporters of the legislation say the new limits are needed to boost spending electric grid improvements, energy efficiency programs and investments in renewable energy.

The Democratic governor’s support comes after a week’s worth of private negotiations between utilities and various interest groups on an earlier draft of the legislation, about which the governor had expressed “significant concerns.” Northam said his intervention made the legislation much more friendly to customers and less friendly to the utilities than it was when first introduced.

“This compromise puts more money in ratepayers’ pockets, ensures real oversight of utility rates, paves the way for significant upgrades to Virginia’s electrical grid, and mandates historic investments in energy efficiency and clean power,” Northam said in a statement.

The Northam compromise repeals and replaces a 2015 law that blocked the State Corporation Commission from reviewing utilities’ base rates, which make up a majority of a customer’s bill, and being able to order rate reductions and refunds. Under the new legislation, the SCC can resume rate reviews but cannot order refunds or lower rates if utilities spend enough on grid modernization or other programs.

Dominion has said it needs this provision in order to keep overall rates stable while making needed investments.

But opponents of the legislation, including Attorney General Mark Herring and a group of heavy industrial users, said the state can mandate large investments in energy efficiency and renewable energy programs without limiting the SCC’s ability to lower base rates if they are too high.

“These policy initiatives can be achieved without the unusual ratemaking restrictions that are imposed by this legislation,” Deputy Attorney General Samuel Towell told Senate lawmakers Monday. He added that the legislation’ effective elimination of refunds and rate reductions will force customers to pay twice for some grid upgrades, though Dominion and Northam said they would not.

Getting Northam onboard is a major win for Dominion, the main driver behind the legislation and state’s most politically powerful corporation. The Democratic governor’s support significantly increases chances of the legislation’s passage into law, but is no guarantee.

Several parts of the new legislation received tough questioning Monday from a bipartisan group of senators at committee hearing, and no consumer rights groups — including those that were part of the governor’s work group — currently support the bill.

“We’d certainly prefer to have their support, and we may get that at the end of the day” said Secretary of Natural Resources Matthew Strickler.

The company has faced unprecedented scrutiny of its political influence and was a frequent punching bag by populist candidates in last year’s election. Several newly elected Democratic lawmakers have pledged to reject any campaign contributions from Dominion.

The Northam compromise is one of the most fiscally impactful pieces of legislation the General Assembly will consider this year. Regulators found last year that Dominion’s base rates are currently overearning by about $400 million a year, which is almost twice what the state typically gives away in economic development grants and tax incentives each year.

Utilities will also give a rebate for past overearnings and pass along any savings from the recent federal corporate tax cuts.

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